Obamacare plans to top $1 trillion, create reluctant workers: CBO

By Russ Britt

Editor’s note: This story was corrected to note that Obamacare insurance costs may not add to federal deficit.

President Obama’s health-care overhaul will put roughly 25 million people into public health exchanges by 2018, ring up more than $1 trillion in insurance costs over the next decade and could well create a small contingent of workers unwilling to work for fear of losing federal medical aid.

Those are the findings from a Congressional Budget Office report released Tuesday, which also said the number of those receiving subsidies through exchanges will total 20 million in that time.

Shutterstock

The report may give ammunition to Republicans and other foes of the Affordable Care Act, who have repeatedly warned of Obamacare’s shortcomings and are trying to repeal it.

The CBO projects that insurance subsidies and related spending will account for increasing chunks of deficit spending, starting at $20 billion this year and steadily increasing to $159 billion in 2024, for a collective cost of just under $1.2 trillion. The cumulative total from the ACA for the next decade could reach $1.35 trillion.

In several charts in its report, the CBO calls these “effects on the cumulative federal deficit.” But in footnotes and other portions of the 175-page report, the CBO points out there are other sources of revenue generated under the ACA that are expected to make it deficit neutral. CBO officials said in 2012 they saw the ACA as deficit neutral in its entirety and have yet to re-examine that issue, a spokeswoman said. This report just examines costs.

Not only does the report on the federal budget take an in-depth look at the ACA and its effects on the budget, but also on the work force in general. Most of these effects won’t hit until after the next few years, once Obamacare has had a chance to gain momentum and get going.

One of the CBO’s most intriguing estimates is that by 2017 there will be 2 million fewer full-time jobs on the market than there would have been without Obamacare, and that figure could climb to 2.5 million by 2024. But the reason isn’t that employers will be reluctant to hire; it’s that workers won’t want to rise to income levels that would cut into their health subsidies, the CBO says. The higher a person’s income, the lower the subsidy under Obamacare.

“The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week),” the report says.

The report says the effect on employers won’t be as pronounced as some believe. The CBO says it has seen “no compelling evidence” that companies are increasing part-time employment in order to avoid facing mandatory coverage of employees.

Story Conversation

About Health Exchange

Health Exchange guides investors to the crucial market intelligence they need to keep up with the health care industry, which makes up one-sixth of the U.S. economy. Anchored by Russ Britt, Health Exchange is the essential site for those looking for the most important news, data and analysis on the sector. You can reach Russ at Rbritt@marketwatch.com.